Everything great in the world is done by neurotics; they alone founded our religions and created our masterpieces. ~Marcel Proust

Saturday, December 11, 2010

Sales Tax on Home Sales, More Government Sleight of Hand

A few days ago, I had a good friend of mine tell me that Congress had passed a new sales tax on home sales or purchases. I didn't think that statement was true simply because a new tax like that would have caught my attention. Could I have missed some bill? Last night I googled "sales tax on home sales" and this is what I found.

The truth is that only a tiny percentage of home sellers will pay the tax. First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home.
We can understand how this misconception got started. The law itself is couched in highly technical language that only a qualified tax expert can fully grasp. (This provision begins on page 33 of the reconciliation bill that was passed and signed into law.) And it does say the tax falls on "net gain … attributable to the disposition of property." That would include the sale of a home. But the bill also says the tax falls only on that portion of any gain that is "taken into account in computing taxable income" under the existing tax code. And the fact is, the first $250,000 in profit on the sale of a primary residence (or $500,000 in the case of a married couple) is excluded from taxable income already. (That exclusion doesn’t apply to vacation homes or rental properties.)

Government is sneaky. Not only do they hide this crap in a bill that has nothing to do with real estate, but then the idiots that pass this nonsense- claim no responsibility because they hadn't read the bill. That would be bad enough. But the real intent will play out many years from now.

A few months ago, I discussed the concept of a "beach head." These are the incremental steps that government uses over time. They use this method because it is sneaky, they can avoid responsibility, and they can allow future legislators to expand the program.

This is how they do it. They pass legislation that they hope people will not discover. Perhaps as a rider in a bill or concealed in some juggernaut such as the health care bill. When it is discovered, we find that it targets wealthy people. Since the vast majority of us are not wealthy, we breath a sigh of relief. Some of us might even say, "screw the wealthy." We can't deny the existence of class warfare nor the politicians who exploit that. So the legislation stands, supported by the majority of us that it doesn't effect. Years from now, government will raise that tax. Or they will ratchet down the income levels of those that it applies to. The wealthy who have already been subject to the tax, won't shed a tear for the lower income levels as the net widens and captures others. They will say it is fair.

This is how government establishes a "beach head." A safe landing spot that establishes a whole new tax or position. They are like termites. Let them in the house, let them get away with this, and the termites will eat your house. Then we will scratch our heads and say, "how did this happen?" The original legislators will be long gone, collecting government pensions. The new legislators, those that increase the sales tax net on smaller incomes, will shrug their shoulders and blame the old guys- those guys that passed Obamacare. They will say that they were just trying to make it fair for everybody. People might say, "That makes sense, it seems fair." Then the government will start raising the tax. Incrementally of course. Probably start with the wealthy and work their way down again. Once they have established the "beach head", it becomes easier to tack on increases. That is the history of all government programs. That is the history of federal taxes and state taxes, social security, medicaid.

Divide and conquer. Attack the weakest link first, establish and justify the position, pillage the next link. Can you imagine the outrage if government attempted to do this to everyone at once? That is precisely why they didn't and they don't. Honest acts do not fear disclosure.

Don't ever think for a second that government is acting in your best interests. They do not. They act contrary to your interests. Nothing illustrates that better than Obamacare. I'd like to think we run the government but clearly we do not. If you still cling to the idea that government acts in our best interests, I will point you to the overwhelming majority of Americans that opposed this bill. The evidence is in. Pay attention to what government actually does, not to anything they say.

3 comments:

In Norway, land of Nobel Peace Prize, Torbjørn Jagland and me, the buyer of any property (some exceptions exist) must pay 2.5% "Dokumentavgift" ("Document fee"). This is a fiscal fee (meaning, it only exists to provide the State with income), and comes in addition to the fee for registrating the property with the authorities. (Currently ca $500.)

In addition, you pay capital tax income on sales of real estate, unless it is your primary residence, currently a flat tax of 28%. The upside is that if you make a loss it is considered a negative gain and thus deductible IF you have other income. With the way the real estate market is going now stateside you will probably never see a similar provision in your tax code - or healthcare plan or wherever they will hide it.

Wow! Thanks for checking in Are. We used to pay a capital gains tax too Are- you had like 18 months to re-invest in another home or you had to pay. That tax was lifted for primary owners who kept their home for a couple years before selling it- I can't recall now how much the old tax was. It may have depended on your income. Lifting that old tax and giving loans to anyone with warm blood kicked off our loan a palooza and now our bust a palooza...ha! Thanks again. Tell those NPP hander outers they did a god job this year...last year...not so much.